830 CMR: DEPARTMENT OF REVENUE
830 CMR 63.00: TAXATION OF CORPORATIONS
830 CMR 63.00 is amended by adding the following section:
830 CMR 63.38.3: Apportionment of Income of Motor Carriers

(1) General. If a motor carrier has income derived from business carried on both within and outside Massachusetts, the Commissioner shall determine the amount of the motor carrier's income derived from business carried on within Massachusetts pursuant to M.G.L. c. 63, § 38, and applicable regulations, except to the extent that section is modified pursuant to this regulation. This regulation, 830 CMR 63.38.3, has been issued pursuant to the commissioner's authority under M.G.L. c. 63, § 38(j).

(2) Definitions. The following definitions shall apply in determining the income of a motor carrier:

(a) Property factor. The denominator of the property factor shall be the average value of all of the motor carrier's real and tangible personal property owned or rented and used during the taxable year. (All property values are determined according to the normal rules of M.G.L. c. 63, § 38.) The numerator of the property factor shall be the sum of the following two amounts: (i) the value of the real and tangible personal property of the motor carrier, other than mobile property, situated in Massachusetts; and (ii) the value of the mobile property owned or rented and used by the motor carrier in Massachusetts. The value of the mobile property owned or rented and used by the motor carrier in Massachusetts shall be the total value of the motor carrier's mobile property, multiplied by the percentage of miles traveled by the motor carrier's mobile property in Massachusetts.

The following example illustrates the provisions of 830 CMR 63.38.3(2)(a):

Example 1: During the taxable year, Kiepahn Trucking owned real and tangible personal property, other than mobile property, with an average value of $10,000,000. Of this property, a portion with an average value of $5,000,000 was located in Massachusetts. Kiepahn also owned mobile property worth $7,000,000. Thirty percent of Kiepahn's mileage was traveled in Massachusetts. The numerator of Kiepahn's property factor is $5,000,000 (the value of its real and tangible personal property other than mobile property located in Massachusetts) plus $2,100,000 (thirty percent of the value of its mobile property). The denominator of Kiepahn's property factor is $17,000,000 (the total value of Kiepahn's real and tangible personal property, including mobile property). Thus, Kiepahn's property factor equals --

$5,000,000 + $2,100,000
$17,000,000

or .4176.

(b) Payroll factor. A motor carrier's payroll factor shall be a fraction, the denominator of which is the total compensation paid by the motor carrier during the taxable year. The numerator of the payroll factor shall be the sum of the following two amounts: (i) the compensation paid in Massachusetts to personnel other than operating personnel; and (ii) the compensation paid in Massachusetts to operating personnel. The compensation paid in Massachusetts to operating personnel shall be computed by multiplying the motor carrier's total compensation to operating personnel by the percentage of miles traveled by the motor carrier's mobile property in Massachusetts.

The following example illustrates the provisions of 830 CMR 63.38.3(2)(b):

Example 2: During the taxable year, Kiepahn Trucking, the motor carrier described in Example 1 of this subsection, had a total payroll for personnel other than operating personnel of $3,000,000, of which $1,000,000 was paid in Massachusetts. Kiepahn had a total payroll for operating personnel of $4,000,000. Thirty percent of Kiepahn's miles were traveled in Massachusetts. The numerator of Kiepahn's payroll factor is $1,000,000 (the Massachusetts payroll for persons other than operating personnel) plus $1,200,000 (thirty percent of Kiepahn's payroll for operating personnel). The denominator of Kiepahn's payroll factor is its total payroll of $7,000,000. Thus, Kiepahn's payroll factor equals:

$1,000,000 + $1,200,000,
$7,000,000

or .3143.

(c) Sales factor. A motor carrier's sales factor shall be a fraction, the denominator of which is the motor carrier's total sales revenue during the taxable year. The numerator of the sales factor shall be the sum of the following two amounts: (i) the motor carrier's revenues, if any, derived from business carried on within Massachusetts from sources other than the carriage of passengers and freight; and (ii) the motor carrier's revenues from the carriage of passengers and freight in Massachusetts. The motor carrier's revenues from the carriage of passengers and freight in Massachusetts shall be the sum of:

1. the motor carrier's total revenues from the carriage of passengers and freight with its own mobile property, multiplied by the percentage of the miles traveled by its mobile property in Massachusetts; and

2. if the motor carrier has revenues from contracts to transport passengers or freight that it fulfills through subcontracts with other motor carriers that are independent contractors, all such revenues multiplied by a fraction, the denominator of which is the total number of pick-ups or deliveries made by such independent contractors on the motor carrier's behalf in the taxable year in states in which the motor carrier is subject to tax, and the numerator of which is the number of those pick-ups or deliveries that occurred in Massachusetts. If the motor carrier has no such revenues, then zero.

The following example illustrates the provisions of 830 CMR 63.38.3(2)(c):

Example 3: Kiepahn Trucking, the motor carrier described in Example 1 of this subsection, had no revenues during the taxable year from sources other than the carriage of passengers and freight. It had revenues from the carriage of passengers and freight of $10,000,000. $9,000,000 of these revenues were from the carriage of passengers and freight in Kiepahn's own trucks, and thirty percent of the miles traveled by these trucks was in Massachusetts. The remaining $1,000,000 of the revenues were from contracts that Kiepahn fulfilled through subcontracts with other motor carriers. These subcontracts required a total of 500 pick-ups and 500 deliveries. One hundred of these pick-ups and deliveries were in Massachusetts. The remaining pick-ups and deliveries were in states in which Kiepahn is subject to tax. Kiepahn's sales factor is:

0 + (9,000,000 x 0.3) + (1,000,000 x 0.1)
10,000,000

or 0.2800.

(d) Motor carrier. A motor carrier means any business entity, including an individual owner/operator, that engages in the carriage of passengers or freight, for compensation, on the public roads or highways. A vendor that uses its own vehicles to transport goods that it has sold is not, on that account alone, a motor carrier.

(e) Mobile property. "Mobile property" means all motor vehicles, including trailers, engaged directly in the movement of property or passengers, other than vehicles eighty percent or more of whose mileage is traveled in one state. Mobile property may be either owned or rented by the motor carrier.

(f) Operating personnel. "Operating personnel" means personnel who operate or travel in mobile property as the predominant activity of their employment.

(3) Sample Computation. Assuming the same facts as in Examples 1 through 3 of this subsection, Kiepahn's Massachusetts apportionment factor is--

.4176 + .3143 + 2 (.2800),
4

or .3230.

(4) Other Methods Available. With the permission of the Commissioner, a motor carrier may apportion income to Massachusetts using a method other than that established by this regulation. The Commissioner normally will grant permission to use an alternative method if the Commissioner is satisfied that the method will reach a result substantially identical to that which would be reached using the method established in this regulation.

(5) Corporations Serving as Motor Carriers and Courier or Package Delivery Services. A single company may be both a motor carrier and a courier or package delivery service (as that term is defined in 830 CMR 63.38.4(2)(f)), and if so its sales revenue from its activities as a courier or package delivery service shall be apportioned as provided in 830 CMR 63.38.4.

(6) Effective date. This regulation, 830 CMR 63.38.3, applies to taxable years commencing on or after its effective date.

REGULATORY HISTORY
Date of Promulgation: 9/15/89